Friedrich von Hayek Dies at 92; An Early Free-Market Economist

By SYLVIA NASAR

Published: March 24, 1992

Friedrich von Hayek, a Nobel Prize-winning economist who was an intellectual forebear of libertarians and other advocates of free-market economics from Ronald Reagan to Margaret Thatcher to Finance Minister Vaclav Klaus of post-Communist Czechoslovakia, died yesterday. He was 92 years old.

Mr. Hayek's secretary, Charlotte E. Cubitt, confirmed his death in Freiburg, Germany, according to Edward Crane, president of the Cato Institute, a conservative American research and policy institute.

Mr. Hayek, a British citizen of Austrian birth who taught at the University of Chicago during the 1950's, had lived in Freiburg for nearly three decades and been ill for several years. The immediate cause of his death was not announced.

Mr. Hayek won the Nobel Prize in 1974 for his work in the 1920's and 1930's on money, prices and the causes of the business cycle. But his most famous work was a 1944 book, "The Road to Serfdom," which predicted that collectivism would fail and warned Western Europe and the United States of the dangers of socialism and big government. 'A Rallying Cry'

"It provided a rallying cry for free-market intellectuals during what was for them the dark days of the 1940's," said Mr. Crane, president of the Cato Institute, said. "He proved to be very prescient."

Stephen Kresge, who is editing Mr. Hayek's collected works -- 18 books, 15 pamphlets and 142 articles -- added, "It was one of those ironies that he was widely read in Eastern Europe at a time when he wasn't being read in the West."

Mr. Hayek influenced virtually every prominent free-market economist, from Milton Friedman to George Stigler, as well as providing intellectual fodder for some of the Reagan Administration young turks, including Martin Anderson, the President's first chief domestic-policy adviser, and Paul Craig Roberts, Assistant Secretary of the Treasury for Economic Policy.

An ardent opponent of most Government intervention in the economy, he was all but ignored by other economists for 30 years after World War II, although he was respected for early contributions to monetary theory.

This was a time when economic thought was most heavily influenced by John Maynard Keynes, an advocate of growth and prosperity with an important role to be played by government. Keynesianism became a dominant intellectual force, as the European social democracies boomed and the Soviet Union and other centrally planned economies scored impressive feats of industrialization.

Mr. Hayek, an extreme hawk on inflation, also laid the intellectual foundations for opposition to high taxes on inheritances or high incomes.

His following in the United States, even after he won the Nobel Prize, consisted mostly of a small band of monetary economists, including Milton Friedman of the University of Chicago, a fellow Nobelist in economics, who held that too-rapid growth of the money supply was the root of all outbreaks of inflation.

With the collapse of Communism in Eastern Europe, his constituency has widened. Mr. Hayek's views on the economic inadequacies and political ills of central planning are now regarded as in the mainstream. Medal From Bush

Last November, President Bush awarded Professor Hayek (rhymes with kayak) the Medal of Freedom, the United States' highest civilian honor. His son, Laurence Hayek, accepted the award.

"More than almost anyone else in the 20th century, this guy was vindicated by the events in Eastern Europe," said Austin Furse, director of policy planning at the White House.

Once described as "articulate, austere and infinitely urbane," Mr. Hayek was born in 1899, into a Viennese family of academics and civil servants.

The tall, patrician Mr. Hayek served as a gunner in World War I before earning two doctorates, one in law and a second in economics. During the 1920's, he was a member of a small circle of brilliant young Austrian economsts, including Fritz Machlup, Oskar Morgenstern and Gottfried Haberler, all of whom, like Mr. Hayek, eventually ended up at prominent American univeristies.

On the eve of the Depression, he left for the London School of Economics, where he lectured in the 1930's and 40's. He won that post by creating a stir with a series of lectures on the causes of economic booms and busts. Debate With Keynes

Soon after arriving in England, Mr. Hayek threw down the gauntlet to John Maynard Keynes by delivering a blistering review of the Treatise on Money. According to Mark Blaug, a historian and professor emeritus at the University of London, the controversy engaged almost everyone who was anyone in monetary economics in that day and was only settled, in Keynes's favor, when Keynes published his "General Theory of Employment, Interest and Money" in 1936.

When Keynesian thought prevailed and his reputation went into eclipse, Mr. Hayek turned to philosophy and psychology, which he first taught at the University of Chicago, where he wrote what many consider to be a second masterpiece, "The Constitution of Liberty." He returned to Austria in the early 1960's and finally settled in Freiburg.

"He got the satisfaction, the enormous satisfaction, not only of recognition," said Mr. Kresge, "but of seeing what has happened in Eastern Europe and the former Soviet Union."

In addition to his son, Mr. Hayek is survived by his second wife, Helene, and a daughter, Christine.